In an article in the Melbourne Age today (February 11) entitled Taxpayer trillions fuel a monster mess, columnist David Hirst writing on the massive injection that the US Congress has approved quotes President Obama who said

“Only the stimulus package to be approved this week, the $US700 billion Troubled Asset Relief Program passed four months ago and $US168 billion in tax cuts and rebates approved in 2008 have been voted on by lawmakers. The remaining $US8 trillion in commitments are lending programs and guarantees, almost all under the authority of the Fed and the FDIC. The recipients’ names have not been disclosed.”

His issue is that the secrecy of the arrangements is troublesome given their magnitude. With that I agree.

Opposition leader Turnbull has decided to go to the wall in opposing the $42 billion package. In particular, they want tax cuts rather than the $12.7 billion in cash handouts. He said they will not be provide economic stimulus and that December’s $10.4 billion in handouts had not worked. Soon after Turnbull provided these conclusions the ABS released the latest retail trade figures which showed that consumer spending shot up by 3.8 per cent in December, the highest monthly increase since August 2000 (since the GST came in).

Various estimates about the size of the federal budget deficit are starting to emerge. The Government has acknowledged that the data shows that tax receipts have fallen dramatically and now their budget is in deficit. For me that is a time of national rejoicing … finally … the federal government is doing what it should … resuming its crucial role in financing non-government (in this case) domestic private savings. Finally, there is a net injection of financial assets coming from the excess spending over receipts. Finally, the drain on private wealth that the creation of budget surpluses requires is at an end.

Australian Prime Minister Kevin Rudd has written an essay extolling the virtues of a new era in public policy which he calls “social capitalism” which is based on a strong guiding role for government and an abandonment of self-regulation by corporate interests which was the hallmark of the neo-liberal era. He sources the current global economic meltdown to the neo-liberal takeover which began more or less in the mid 1970s after the first OPEC oil price rise. The problem is that his new vision is still tainted with the worst elements of the neo-liberal era.

Today in the Fairfax press, economics writer Ross Gittins in an article entitled No good reason to feel depression claims that we should not be too worried about the looming recession because after all things aren’t likely to be that bad. Well from my perspective recessions are episodes that wreak havoc on the most disadvantaged citizens in our society and should never occur.

The Sydney Morning Herald is running a series at present looking at the labour market prospects in the coming year. It is a welcome return of emphasis to the massive labour wastage that this country endures given that the major media has up until now largely bought the erroneous “we are at full employment” rhetoric pumped out by the previous federal government.

The story entitled Statistics point to hard time on job front, written by Andrew West and Jessica Irvine and published today (January 24, 2009) began with:

AS MANY as 2 million Australians could be jobless or working fewer hours than they would like by the next federal election – the highest rate of “labour wastage” in a generation …

An analysis by a leading labour economist, Professor Bill Mitchell of the University of Newcastle, predicts the total rate of labour wastage could rise to about 20 per cent of the workforce by mid-2010.

The extraordinary events in world financial markets which have undermined the basis of capitalism have led to equally amazing Government responses – massive injections of public spending, nationalisations of banks and bailouts of huge financial institutions with little regard for the relevant shareholder interests.

A major paradigm shift is occurring in economic thinking away from the free market deregulation era that has dominated since the 1970s. All the logic that justified government cut backs; the run down of public infrastructure; the harsh treatment of welfare recipients; the wasteful privatisations, and the rest of the neo-liberal litany that served to transfer wealth from poor to rich and create an disadvantaged underclass has been destroyed by these events.

On January 1, 2005, the ABC carried the headline Business welcomes trade deal, which officially came into force as the new year unfolded. The Australian-US free trade deal was touted by the current government as a major breakthrough. Well from where I sit it is neither a free trade agreement or one that we will look favourably on in the years to come. The fact that the ALP tried to convince us that they were capable of showing leadership (not!) by passing it with some irrelevant amendments is even more frightening.

Foreign minister Downer displayed his fundamental macroeconomic ignorance yesterday when he was trying to explain to reporters the accounting behind the relief payments the Australian Government is proposing to aid the tsunami victims. Reported on the ABC he said that “the Government will need to dip in to the Budget surplus to provide relief money to areas affected by the tsunami disaster. The amounts proposed are beyond the government’s current disaster relief fund. For reasons I explain below this fund can be nothing more than a notional accounting allocation that the Government considers it will spend each year on disaster assistance. It does not exist in the same way as you and me (as households) might have saving accounts with actual dollars in them in a building society (or bank) each year.